Transforming tax compliance – the role of data and technology
In this series, we examine the challenges tax departments face in an evolving tax compliance environment that rewards agility, new skill sets and the ability to do more with less. In each article, we examine a different topic and provide insights on how tax departments can transform and thrive in the tax compliance landscape of today and tomorrow. In our first article, we focused on tax compliance regulatory, legislative and market trends and how leading organizations are addressing them. Our second article examined talent issues tax departments are facing and explored leading practices. This final article in our series focuses on data and technology.
Up until now, tax departments have been somewhat reactive with respect to technology advances, but as new reporting and regulatory tax paradigms take shape, the roles of data and technology in the tax compliance function need to evolve to keep pace. Employers are realizing that their tax compliance teams need to quickly get up to speed and incorporate more data and technology skills.
With companies being asked to provide data more quickly, to multiple jurisdictions and in different formats, the potential for risk to organizations has risen. Recognizing the growing need for technology skills in the tax world, accrediting bodies such as the National Association of State Boards of Accountancy (NASBA) and the American Institute of Certified Public Accountants (AICPA) have supported incorporating such skills into the US Certified Public Accountant certification.¹
Companies need to balance the need for data management and updated technology resources with other budget priorities. Challenges abound – among them a lack of skills in these areas in current tax departments, high costs and competing strategic priorities, as well as the need to manage nonintegrated systems. Companies need to map out a future in which they decide whether they can meet the new data and technology standards with their existing resources, employee base and systems or whether they should consider partnering with third parties that can provide support and expertise more efficiently, freeing up in-house teams to focus on other critical areas.
The role of technology and data in tax compliance is becoming more critical due to the following:
- Tax has become a value driver. The C-suite is expecting tax to play a greater role in organization-wide decisions. As a result, analyzing, interpreting and communicating the implications of data outside the tax department is becoming more important
- Real-time data needs are growing. To comply with filing requirements, the tax function increasingly needs the ability to access and manage data closer to real time, which creates a need for connected tax technology and data ecosystems and for broader skills development within the tax compliance and reporting function
- Talent retention is a challenge. Talent shortages are driving a need to embed greater standardization and agility in the technologies and systems used for tax reporting
- Technology is an asset for recruiting. Failure to keep up with technological advances and to respond to data management trends may increase compliance risk and have negative implications for attracting the next generation of talent in the tax department.
What we are seeing
Tax is viewed as a strategic business partner
CEOs are looking to transform how their organizations operate to meet challenges related to evolving reporting responsibilities and global policy disruption. This entails focusing on reducing costs, investing in digital capabilities and improving risk management. Tighter integration of tax with finance through connected end-to-end processes, data strategies and connected technology ecosystems may help achieve these goals.